No Changes in RBI Repo Rates! Does Mutual Fund Get Affected?
In order to keep a check on the excess liquidity in the economy, narrow down the money market rates and keep a track on inflation in the FY18, RBI(Reserve Bank of India) increased the reverse repo rate to 6%, keeping the repo rate unchanged at 6.25%. After this decision, RBI is expecting the banks to ease liquidity in the market. What is the effect of this news on the mutual fund is the matter of concern for us! Just have a look here.
The Impact of RBI Policy Decisions on Mutual Funds:
How are Equity Funds Affected?
As the rates, i.e., reverse repo rate and cash reserve ratio (CRR) are unchanged; the equity investments can provide better valuations in the future. However, the correlation between equity investments and credit policy does not impact your investments. The investors who have invested their money in the equities must stay therein for a longer tenure to gain substantial benefits. Investors are recommended to continue their SIPs irrespective of the RBI announcements regarding credit policy changes. One just needs to have a balanced portfolio with hybrid and large cap mutual funds to be in the majority and, a measured exposure to the small- and mid-cap stocks.
How are Debt Funds Affected?
Bank Fixed Deposits shall not provide you with good returns after the demonetisation phase. As the market is flooded with surplus cash now, the banks have already slashed their home and PPF interest rates by 0.1%. Accordingly, the FDs are expected to go down in the near term. In case you want to invest in the debt mutual funds, then you can go for the schemes which have bond investments and provide decent returns at times when the interest rates fall in the market. The investors may continue investing in the ultra short-term bond funds to meet the short-term financial goals. Moreover, the Credit Opportunities Funds are further a better option to make an investment for a period of one to three years.
Beat inflation Via Investments- What Should You Do?
In order to beat inflation which is expected to be 4.5% in the first half of the FY18 and 5% in the second half, the equity investments are the best alternative. Exposure to long-term investing in any of the equity schemes would be beneficial for the investors to earn inflation-beaten returns. Moreover, you must track your investment regularly so as to make sure that your funds are performing well.
As the growth of the economy is on a rapid pace where the market is showcasing all-time highs, the investors are recommended to go with the small- and mid-cap mutual funds which offer high-growth opportunities to the investors as per the market moves. Staying invested for a longer tenure is what one needs to do at present and wait for the right moment to take an adequate step for gaining substantial benefits.
Accordingly, the unchanged reverse repo rates by RBI has led the market to provide noteworthy equity investment opportunities. Moreover, the debt investments are further remained benefiting for the investors to achieve the short-term financial goals. You too can make the choice of the fund as per your requirement and earn the growth on capital with ease.
We, at MySIPonline, provides you with the online investment solutions and tools like SIP calculator which you can use to make a worthwhile investment in a completely paperless manner. So begin your mutual fund investments in the current growing market and grab the best opportunity for your future growth.
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